May 29, 2006

We have to take what they say with a nice big grain of salt (the writer is a bigwig at PNAC; need I say more?), but this review of Minxin Pei’s new book on China makes some interesting assertions.

China has stalled in a “trapped transition,” Pei argues, because its Communist leaders insist on maintaining power and taking a gradual approach to market reforms. This is not part of a strategy for political liberalization; instead, China’s leaders have been at pains to shore up their monopoly on power. The dividends of economic reform are used to “strengthen their repressive capacity and co-opt potential opposition groups, especially counterelites.” Seeing even limited erosion of their political power causes them to “intensify their efforts to maximize current income while maintaining a high level of repression to deter challengers.”

Pei’s attention to the attitudes of China’s rulers is important, given the general disregard for their thinking and behavior in American and European debates about China policy. We tend to interpret political and economic decision-making from a Western, democratic perspective, frequently projecting onto Chinese leaders attitudes and objectives they simply do not share. Pei challenges the self-deluding notion that Chinese leaders can be prevailed upon to see political reform as in their interest. He makes it clear that they see no such thing.

Chinese leaders’ choices do make sense, however, according to their own agenda. Decisions about which sectors to liberalize (typically the smaller, less valuable ones) and who to let into the booming economy (sometimes foreign companies rather than domestic, sometimes the other way around) and who to lend to are politically motivated. Overall, he says, China lags behind other former state-socialist economies that began reforms later….

While Pei is generous to the intellectual adherents of the gradualist economic theory, he argues that favorable assessments are distorted by the failure to consider “the greatest constraint on economic reform: an authoritarian regime’s fear of losing power during reform.” Such fear prevents the ruling elites from making “accompanying reforms that restructure the key political institutions that define power relations and enforce the rules essential to the functioning of markets, such as the security of property rights, transparency of government, and accountability of leaders.”

It’s not for nothing, Pei writes, that authoritarian regimes do not follow the “big bang” approach to economic reform.

Yet China’s elites are motivated by more than just the desire to maintain power. They recognize the uncertainty in the delicate balance they have created, and respond to the enormous incentive to cash in on the benefits of power before the enterprise collapses. According to Pei, the widely accepted belief that East Asia’s “strong government authority + pro-market policies = superior economic performance” neglects the crucial point, that a strong state can just as easily be a “grabbing hand” as a “helping” one; that is, be a “predatory state.” The results, he writes, are “dire.” The belief that economic development under such conditions could lead to democracy is “wishful thinking because the predatory state and economic development are, logically, mutually exclusive.”

One might say that, in the predatory state Pei describes (specifically, a decentralized one), all hell breaks loose. This is not theoretical. Pei documents massive corruption, a bloated state apparatus that fails to perform its functions, the sapping of revenues by local governments, and, ultimately, the inability to control officials. Ideological commitment to communism long abandoned, these officials are increasingly preoccupied with their own exit strategies, which involve getting foreign passports and transferring money abroad. Whereas China’s Communist elite were long known to exhibit the “fifty-nine phenomenon”–accelerating their self-dealing as they approached retirement age–Pei shows that the age of those engaging in corrupt activities is getting lower and lower. At the most extreme, Pei writes that officials collude with criminal organizations, resulting in “local mafia states,” and he provides details of dozens of such cases.

Sorry for the fiendishly long clip, but I do find it a tantalizing theory – which is not to say I endorse it. I need a lot more evidence before I buy into the idea that the CCP wheeler dealers are trying to cash in in anticipation of an inevitable collapse. As much as I’d love to see them go, things are looking mighty good over there at the moment, and “the coming collapse of China” is most likely way farther off than anyone at PNAC imagines.

The Discussion: 7 Comments

Ooof, I dunno. I’m probably more positive about the CCP than you are, Richard – I think there are some good people in the regime who really want to do the right thing for the right reasons – but the more I think about China, the more I’m convinced that there are some tremendous instabilities – the gap between the cities and the countryside, for one, and the inability of the central government to reign in the depravations of local governments – which will take the most enlightened leadership to deal with. And given the current regime’s repression of the media (which as I’ve said many times I think is a huge mistake), I’m not convinced that they have the vision to guide China to a more stable, secure future.

Make no mistake – I really want China to succeed. Every time I go there, I am overwhelmed with love and admiration for the Chinese people, for their warmth and spirit of enterprise. But they have an awful lot of obstacles to overcome, and I don’t know if the current regime is up to the task.

It’s interesting, certainly. Lisa I would have to agree that the current generation of leaders WILL NOT REFORM. They simply refused to. Look at that joke of a white paper that essentially accused any proponent of multi-party democracy as being a traitor to China.

Future generations may choose to reform, but I think it will be forced upon them before then.

Lisa, I always said there are many, many noble, decent people in the CCP who truly want to see change and reform. There are also plenty of criminals among them, living off the fat of the land and exploiting and oppressing without the slightest hesitation. All in all, I’d say the regime is 70 percent atrocious, 20 percent bad and 10 percent acceptable. I agree with you about the impossible challenges brought on by the disparities between haves and have nots.

I take this with a grain of salt, but the guys I deal with over at the PBOC don’t seem to have this philosophy, even if they are approaching retirement age. They live in really frugal apartments and drive shitty cars even though they could easily embezzle tens of thousands of dollars without anyone noticing b/c anything under 100k is basically a rounding error in those cash transfers.

Corruption and getting rich off the efforts of the masses is a documented fact in China. So is the fact that many of the party members live simple, frugal, honest lives. The fact that many of them are honest and decent doesn’t diminish the badness of the many thousands of corrupt officials.

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A peculiar hybrid of personal journal, dilettantish punditry, pseudo-philosophy and much more, from an Accidental Expat who has made his way from Hong Kong to Beijing to Taipei and finally back to Beijing for reasons that are still not entirely clear to him…